Out of Gas?

Over the next several months, hundreds of electric and plug-in hybrid cars will arrive in Texas cities. They will emit little pollution and be cheaper to operate than conventional vehicles. For the state government, however, the advent of alternative-fuel vehicles creates a long-term concern: They will generate little or no gas tax revenue — a key funding source for keeping the state's roads and bridges in good repair.

Over the next several months, hundreds of electric and plug-in hybrid cars will arrive in Texas cities. The vehicles will emit little pollution and generally be far cheaper to operate than conventional vehicles. For the state government, however, the advent of alternative-fuel vehicles creates a long-term concern: They will generate little or no gas tax revenue — a key funding source that the state relies on to keep roads and bridges in good repair.

Texas has not raised its gasoline tax since 1991, despite a fast-swelling population and rising costs of road construction (especially for materials such as steel and asphalt). The tax has stayed put at 20 cents per gallon for both gasoline and diesel, putting Texas in the bottom quarter of states (California's gas tax is the highest, at more than twice Texas'). The federal government applies an extra 18.4 cents per gallon for gasoline (24.4 cents for diesel); that too has not been raised since 1993.

Annual state motor fuels tax receipts fell by 2 percent in fiscal 2009. That was due largely to the recession, which caused people to drive less. Over the longer term, increasing fuel-efficiency among cars and trucks will also be an issue since less fuel consumed means less taxes paid. Fuel-efficiency of gasoline-powered vehicles hovered around 17 miles per gallon across Texas from 1991 to 2005, according to the Texas Transportation Institute. Since then, fuel efficiency has risen to 20.5 miles per gallon in 2009.

"Our financial resources are declining in proportion to our needs," said Deirdre Delisi, the chairwoman of the Texas Transportation Commission, which oversees the Texas Department of Transportation, in testimony before the Legislature earlier this year. "As this trend worsens, it severely impacts our ability to maintain the highway system in rural areas."

Texas is projected to need to invest $315 billion by 2030 to keep its roadways in good shape. That's more than $14 billion per year — larger than TxDOT's entire budget of $8 billion in fiscal 2010.

Texas's state gasoline tax accounted for about 29 percent of revenues into the state highway fund, the major source of funding for TxDOT, in fiscal 2009. However, a sizable chunk of that gets used for purposes other than road and bridge repair. One quarter of Texas' 20-cent gas tax goes into the Permanent School Fund before it even reaches TxDOT's accountants. Another $908.6 million of the remaining $2.2 billion from the state gas tax is spent for purposes other than TxDOT; of that, $688.6 million went to the Department of Public Safety (which does in fact perform highway-related functions), and the rest to other causes, such as the arts and historical commissions.

Concerns over a static gas tax are hardly confined to Texas. Many other states have not raised their gas tax since the 1990s, due largely to a political allergy to higher taxes. One exception is Oregon, which will boost its gas tax by 6 cents (about 25 percent) on Jan. 1.

Last session, Texas lawmakers did consider ways to raise the gas tax. One bill would have allowed counties to vote on raising the tax and other vehicle fees; it was authored by state Sen. John Carona, R-Dallas, then the chairman of the Senate's Transportation and Homeland Security Committee who co-authored an opinion piece with state Sen. Kirk Watson, D-Austin, earlier this year on the need for lawmakers to update the gas tax system. Another bill would have indexed the existing tax to inflation. Both bills died.

With a new wave of conservative Republicans arriving in the Legislature, and continued opposition to new taxes, there may be even less appetite for raising the gas tax in the new session. Gov. Rick Perry is staunchly opposed. "It's never a good time to raise taxes on people of Texas," especially in tough economic times, said a Perry spokeswoman, Catherine Frazier.

Indeed, Texas lawmakers have also attempted to go the other way on gas taxes: Three years ago, when fuel prices were nearing a record, the House passed a bill pushed by state Rep. Trey Martinez Fischer, D-San Antonio, urging a three-month holiday from the state gas tax. But the bill eventually died.

So what can be done to shore up Texas' slowly deteriorating roads, with little prospect of stemming the slow decline of the gas tax?

Perry supports ending the diversion of gas tax revenue for other purposes and making sure the funds actually go toward upkeep of the state's highways, according to his spokeswoman.

The governor also argues that Texas should get more of the federal tax money it sends back to Washington. Right now, Texas officials say, the state gets back only 70 cents of every dollar in federal gas tax funding it sends to Washington — the lowest of any state, Frazier said. The governor also has favored building new toll roads.

A longer-term alternative, concurrent with the rise of electric and other fuel-efficient vehicles, is the possibility of assessing a tax in a different way — on the amount of miles a vehicle travels. This could be assessed through a low-tech annual odometer reading, or via an electronic chip that would track miles (including in and out of the state). Various pilot programs to test this have gone on around the country, including a two-yearstudy by the University of Iowa just wrapping up in Austin.

For now, it's unlikely that such a fee on "vehicle miles traveled" will be implemented in Texas (or any other state), as a highly preliminary study released last week by TxDOT concluded.

"Generally speaking, respondents reacted negatively to the notion of shifting fundamentally from a fuel-based tax to a user-fee system," the study stated.

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